Investors take fright as recession worries grow

On another gloomy day for the market, with sentiment once more dominated by thoughts of recession, Russia-focussed oil explorer Imperial Energy bucked the downward trend despite another drop in the crude price.

The company's shares have been volatile in recent days as investors fretted about whether India's ONGC would proceed with its £12.50 a share bid for the company. With oil more than halving since the bid was unveiled in August, there was concern ONGC might try to renegotiate the terms. But ONGC has now received all the relevant approvals from Russian regulatory authorities, and it indicated today it hopes to seal the deal in the next two months or so. The effect of this was to send Imperial's shares soaring 126p to £11.26. Analyst Brendan Wilders at Oriel Securities said:

"The offer document is expected to be posted within 28 days. This should remove lingering doubts that the offer will proceed on its original terms."

Overall though, it was another dismal day, with the FTSE 100 closing 157.23 points lower at 4246.69, the fall accelerating during the afternoon as Wall Street moved sharply lower in early trading. Everywhere investors looked, there were more signs of the global downturn. Chinese trade figures pointed to slowing domestic demand, Japan reported a fall in exports, while several UK and US corporates revealed recessionary damage.

Intercontinental Hotels fell 41p to 499p as it warned of worsening market conditions in October, while housebuilder Taylor Wimpey lost 1.75p to 11.5p after reporting a halving of its order book from this time last year and what it called "disappointing" debt negotiations with its lenders. Cookson, which supplies industrial materials to make glass, iron and steel, slumped 42p to 130p as it said 2008 results would be below expectations.

In the US, following disappointing results from coffee shop Starbucks and fears that General Motors could run out of cash, came news of production cuts at aluminium maker Alcoa and growing talk of a fourth quarter loss at Goldman Sachs.

With metal prices once more under pressure and Brent crude falling to around $55 a barrel - its lowest level since January 2007 - miners and oil companies were among the leading UK losers. Vedanta Resources dropped 115p to 683p, Eurasian Natural Resources Corporation dropped 31.25p to 283p and Lonmin lost 107p to £10.80. Antofagasta fell 34.5p to 360.5p, with Evolution Securities issued a sell note with a 203p price target. The broker said:

"Molybdenum prices have plunged 63% to $12.38 a pound since Friday which means that lower by-product credit revenues from the metal will hammer the group's cash costs at Los Pelambres. We believe that the market has not fully appreciated this dramatic fall and its effect on Antofagasta's earnings."

Financials were also weaker, with Lloyds TSB down 17.8p at 177.4p and HSBC 39p lower at 696.5p as Credit Suisse cut its price target to 800p from 875p.

There were some bright spots. Vodafone rose 6.7p to 115p despite trimming its full year revenue forecasts. The company said it would maintain its profit levels and planned to cut out £1bn of costs. Tesco added 8.6p to 331.6p despite two surveys showing the supermarket chain was losing out to discount rivals. The company, which is currently detailing its Chinese expansion plans on an Asian analysts trip, said it planned to increase its own discount range.